By IFCMarkets
US dollar index resumed the decline after weak May jobs report. The Federal Reserve dovish June statement didn’t contribute to dollar’s strength. Will the US dollar index continue advancing?
US existing home sales rose 1.8% in May to 619 thousand annual rate, the highest level in nearly a decade. Earlier US Department of Commerce reported US retail sales rose 0.5% in May after a 1.3% surge in April. Continued growth in retail sales together with strong housing market provided a basis for guarded optimism of Fed Chair Janet Yellen at her recent House testimonies. Yellen said US economic growth is accelerating in the second quarter and she expects there will be a corresponding improvement in jobs growth which will allow to further hike rates this year. However manufacturing production fell 0.1 percentage point year-on-year in May and inflation slipped 0.1 percentage point lower to 1% year-on-year with consumer sentiment report for May indicating consumer inflation expectations for May 2017 fell by 0.4 percentage points to 2.4%. And International Monetary Fund on Wednesday downgraded US growth to 2.2% in 2016 from 2.4% estimated in April stating that US dollar was overvalued. At the same time UK’s exit from the European Union has increased global financial uncertainty, increasing safe haven demand and supporting dollar. Today May Durable Goods Orders and June Consumer Sentiment by Michigan University will come out, the tentative outlook is negative for the dollar. On June 28 the final reading of US GDP for first quarter will be released, a revision downward is expected.
On the daily chart USDIDX: D1 had been falling since the end of January with a May retracement, inspired by active June rate hike support campaign by several Federal Reserve officials, failing to result in a breach of the resistance. It continued downward correction after another retracement prior to Federal Open Market Committee June 15 dovish statement. The price has breached above the resistance and last fractal high at 95.287. The Donchian channel is tilted upward indicating uptrend. The RSI oscillator is edging higher but hasn’t yet reached the overbought zone. The MACD indicator is below the signal line and the gap is falling with the signal line itself below the zero level. This is a bullish signal. The Parabolic indicator has reversed to a buy signal. We can go long straight away. The stop loss can be placed below the fractal low at 93.395. After placing the order the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade.
| Position | Buy |
| Buy limit | above 95.287 |
| Stop loss | below 93.395 |
Market Analysis provided by IFCMarkets